We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards AAR Corp. (NYSE:AIR) , and what that likely means for the prospects of the company and its stock.
AAR Corp. (NYSE:AIR) was in 17 hedge funds’ portfolios at the end of September. AIR investors should pay attention to an increase in enthusiasm from smart money recently. There were 16 hedge funds in our database with AIR positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Atwood Oceanics, Inc. (NYSE:ATW), New Media Investment Group Inc (NYSE:NEWM), and Southside Bancshares, Inc. (NASDAQ:SBSI) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
What have hedge funds been doing with AAR Corp. (NYSE:AIR)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 6% lift from the second quarter of 2016. However, there were a total of 20 hedge funds with a bullish position in AIR at the beginning of this year, so overall hedge fund ownership is still down over the past three quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Fisher Asset Management, led by Ken Fisher, holds the most valuable position in AAR Corp. (NYSE:AIR). Fisher Asset Management has a $35 million position in the stock. The second largest stake is held by AQR Capital Management, led by Cliff Asness, holding a $9.9 million position. Some other members of the smart money that are bullish contain Jim Simons’ Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Ken Grossman and Glen Schneider’s SG Capital Management. We should note that SG Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.